Market movers today
- Development in bonds markets continues to be a key driver for most markets. Focus will be on any signs of the ECB increasing bond purchases and lots of Fed speeches throughout the week.
- In the US today, we get ISM manufacturing. We expect it to remain high.
- We will also look out for flash February HICP figures out of Italy and Germany given the spike in euro area inflation in January. French figures showed a decline last week.
- We expect continued strong Swedish PMI figures for February.
- Rest of the week focus turns to Euro Flash HICP inflation tomorrow and China’s National People’s Congress on Friday.
The 60 second overview
Macro: Chinese PMI manufacturing saw a drop in February in another sign that the world’s second largest economy is slowing down, see chart. Caixin PMI manufacturing dropped to 50.9 in March (consensus 51.4) from 51.5 in February. It was the third monthly decline and went against our expectations of an increase as the surge in metal prices in February had sent a more bullish signal. The official PMI manufacturing released on Sunday also dropped – to a nine-month low of 50.6 from 51.3 in January. The numbers may have been affected by virus related restrictions around the Chinese New Year but it also fits with the picture of a gradual slowdown this year driven by policy tightening.
Vaccine and COVID-19: The US CDC approved the one-shot Johnson&Johnson vaccine on Saturday and shipments started on Sunday according to US officials, see Reuters. The EU regulator EMA is expected to approve the vaccine on 11 March, which will add an important weapon in scaling up the vaccine roll-out. In the short term the situation looks challenging in Europe where both Germany, France, Italy and others have seen cases move higher again. We expect the turning point towards real improvement will come during April when the weather warms up and the vaccine roll-out has protected more of the vulnerable groups, see COVID-19 Update: The Great Gradual Reopening… (in April), 25 February 2021.
Equities: Amid another volatile session, global equities closed mostly lower on Friday. The direction of bond yields continued to dominate risk sentiment and sector performance, but this time the day was saved by growth and momentum. The risk aversion eased as well, with defensives mostly underperforming cyclical sectors. This took the S&P 500 -0.5% lower, Dow -1.5% but Nasdaq 0.6% higher. US futures are indicating an opening in green.
FI: The bearish sentiment in the global bond market eased on Friday as 10Y and 30Y Treasuries rallied some 10bp and the curve flattened. The move in the 10Y German government was more modest, but we expect the positive sentiment will continue this morning. However, if yields has to decline further then we have to see more than just verbal intervention from ECB and the Federal Reserve.
FX: USD, JPY and CHF rose vis-à-vis NZD, NOK and AUD on Friday as oil prices and industrial metal prices lost ground. EUR/NOK rose to 10.46 – the highest level since the end of January, while EUR/USD finished the week below 1.21.
Oil: The price on Brent oil fell further overnight to USD65.5 per barrel down from the latest peak on Thursday last week at USD67.7 per barrel.
Credit: The downbeat sentiment in credit continued on Friday, where iTraxx Xover widened 265bp (+2bp) and Main to 51bp (+1/2bp). Cash bonds were more under pressure with HY widening 11bp and IG 1bp.
Nordic macro and markets
Swedish manufacturing PMI (February) is out today and is likely to remain at elevated levels around 60. Like in most other places, Swedish manufacturing seems to be largely unaffected by the ongoing pandemic.